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Note 6 - Capital Stock, Stock Plans, Warrants, and Stock Based Compensation | 12 Months Ended
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Dec. 31, 2016
Notes to Financial Statements |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | NOTE 6 CAPITAL STOCK, STOCK PLANS, WARRANTS, AND STOCK BASED COMPENSATION Stock Option Plans The Company adopted the 2003 Outside Directors Stock Plan (the “2003 Plan”), which was approved by our stockholders at the Annual Meeting of Stockholders on July 29, 2003. Options granted under the 2003 Plan generally have a vesting period of six months from the date of grant and a term of 10 years, with an exercise price equal to the closing trade price on the date prior to grant date. The 2003 Plan also provides for the issuance to each outside director a number of shares of Common Stock in lieu of 65% or 100% (based on option elected by each director) of the fee payable to the eligible director for services rendered as a member of the Board of Directors (“Board”). The number of shares issued is determined at 75% of the market value as defined in the plan. The 2003 Plan, as amended, also provides for the grant of an option to purchase up to 6,000 shares of Common Stock for each outside director upon initial election to the Board, and the grant of an option to purchase 2,400 shares of Common Stock upon each re-election. The number of shares of the Company’s Common Stock authorized under the 2003 Plan is 800,000, pursuant to the 2003 Plan, as amended. On April 28, 2010, the Company adopted the 2010 Stock Option Plan (“2010 Plan”), which was approved by our stockholders at the Company’s Annual Meeting of Stockholders on September 29, 2010. The 2010 Plan authorizes an aggregate grant of 200,000 Non-Qualified Stock Options (“NQSOs”) and Incentive Stock Options (“ISOs”) to officers and employees of the Company for the purchase of up to 200,000 shares of the Company’s Common Stock. The term of each stock option granted shall be fixed by the Compensation and Stock Option Committee (“Compensation Committee”), but no stock options will be exercisable more than ten years after the grant date, or in the case of an incentive stock option granted to a 10% stockholder, five years after the grant date. The exercise price of any ISO granted under the 2010 Plan to an individual who is not a 10% stockholder at the time of the grant shall not be less than the fair market value of the shares at the time of the grant, and the exercise price of any incentive stock option granted to a 10% stockholder shall not be less than 110% of the fair market value at the time of grant. The exercise price of any NQSOs granted under the plan shall not be less than the fair market value of the shares at the time of grant. No employees exercised options during 2016 and 2015. During 2015, the Company issued a total of 3,423 shares of our Common Stock upon exercise of 3,423 NQSOs by an outside director from the 2003 Plan, at an exercise price of $2.79 per share which resulted in total proceeds of approximately $10,000. The summary of the Company’s total plans as of December 31, 2016 and 2015, and changes during the period then ended are presented as follows:
|  | Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Term (years) |  |  | Aggregate Intrinsic Value (2) |
Options outstanding January 1, 2016 |  |  | 218,200 |  |  | $ | 7.65 |  |  |  |  |  |  |  |  |
Granted |  |  | 62,000 |  |  |  | 4.09 |  |  |  |  |  |  |  |  |
Exercised |  | ─ |  |  | ─ |  |  |  |  |  |  |  |  |
Forfeited/expired |  |  | (33,000 | ) |  |  | 8.14 |  |  |  |  |  |  |  |  |
Options outstanding end of period (1) |  |  | 247,200 |  |  | $ | 6.69 |  |  |  | 4.3 |  |  | $ | 20,940 |
Options exercisable at December 31, 2016 (1) |  |  | 181,867 |  |  | $ | 7.61 |  |  |  | 3.7 |  |  | $ | 20,940 |
Options vested and expected to be vested at December 31, 2016 |  |  | 239,750 |  |  | $ | 6.78 |  |  |  | 4.3 |  |  | $ | 20,940 |
|  | Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Term (years) |  |  | Aggregate Intrinsic Value (2) |
Options outstanding January 1, 2015 |  |  | 239,023 |  |  | $ | 7.81 |  |  |  |  |  |  |  |  |
Granted |  |  | 12,000 |  |  |  | 4.19 |  |  |  |  |  |  |  |  |
Exercised |  |  | (3,423 | ) |  |  | 2.79 |  |  |  |  |  |  | $ | 4,298 |
Forfeited/expired |  |  | (29,400 | ) |  |  | 8.13 |  |  |  |  |  |  |  |  |
Options outstanding end of period (1) |  |  | 218,200 |  |  | $ | 7.65 |  |  |  | 4.8 |  |  | $ | 14,676 |
Options exercisable at December 31, 2015 (1) |  |  | 169,533 |  |  | $ | 8.47 |  |  |  | 4.5 |  |  | $ | 14,676 |
Options vested and expected to be vested at December 31, 2015 |  |  | 212,333 |  |  | $ | 7.72 |  |  |  | 4.8 |  |  | $ | 14,676 |
(1) Options with exercise prices ranging from $2.79 to $14.75 (2) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The summary of the Company’s nonvested options as of December 31, 2016 and changes during the period then ended are presented as follows:
|  | Shares |  |  | Weighted Average Grant-Date Fair Value |
Non-vested options January 1, 2016 |  |  | 48,667 |  |  | $ | 2.87 |
Granted |  |  | 62,000 |  |  |  | 2.19 |
Vested |  |  | (30,334 | ) |  |  | 2.87 |
Forfeited |  |  | (15,000 | ) |  |  | 2.88 |
Non-vested options at December 31, 2016 |  |  | 65,333 |  |  | $ | 2.23 |
Capital Stock Issued for Services The Company issued a total of 55,793 and 71,324 shares of our Common Stock in 2016 and 2015, respectively, under our 2003 Plan to our outside directors as compensation for serving on our Board. As a member of the Board, each director elects to receive either 65% or 100% of the director’s fee in shares of our Common Stock. The number of shares received is calculated based on 75% of the fair market value of our Common Stock determined on the business day immediately preceding the date that the quarterly fee is due. The balance of each director’s fee, if any, is payable in cash. The Company recorded approximately $233,000 and $269,000 in compensation expense for the twelve months ended December 31, 2016 and 2015, respectively, for the portion of director fees earned in the Company’s Common Stock. Preferred Share Rights Plan In May 2008, the Company adopted a preferred share rights plan (the “Rights Plan”), designed to ensure that all of our stockholders receive fair and equal treatment in the event of a proposed takeover or abusive tender offer. In general, under the terms of the Rights Plan, subject to certain limited exceptions, if a person or group acquires 20% or more of our Common Stock or a tender offer or exchange offer for 20% or more of our Common Stock is announced or commenced, our other stockholders may receive upon exercise of the rights (the “Rights”) issued under the Rights Plan the number of shares our Common Stock or of one - one hundredths of a share of our Series A Junior Participating Preferred Stock, par value $.001 per share, having a value equal to two times the purchase price of the Right. In addition, if the Company is acquired in a merger or other business combination transaction in which we are not the survivor or more than 50% of our assets or earning power is sold or transferred, then each holder of a Right (other than the acquirer) will thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the purchase price of the Right. The initial purchase price of each Right was $13.00, subject to adjustment as defined in plan. The Rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors. The Rights may be redeemed by us at $0.001 per Right at any time before any person or group acquires 20% or more of our outstanding Common Stock. The Rights expire on May 2, 2018. Warrants and Capital Stock Issuance for Debt As of December 31, 2016, the Company has no Warrant outstanding. On August 2, 2016, the Company issued an aggregate of 70,000 shares of the Company Common Stock resulting from the exercise of two Warrants, at an exercise price of $2.23, issued to two lenders in connection with a $3,000,000 loan dated August 2, 2013 received by the Company (See Note 10 – “Long-Term Debt – Promissory Note” for further information on the exercise of the Warrants and the loan). Shares Reserved At December 31, 2016, the Company has reserved approximately 247,200 shares of Common Stock for future issuance under all of the option arrangements. Stock Based Compensation As discussed above, the Company has certain stock option plans which it awards NQSOs and ISOs to employees, officers, and outside directors. Stock options granted to employees generally have a six year contractual term with one - third yearly vesting over a three year period. Stock options granted to outside directors generally have a ten year contractual term with vesting period of six months. On May 15, 2016, the Company granted 50,000 ISOs from the Company’s 2010 Stock Option Plan to our newly named Executive Vice President (“EVP”). The ISOs granted were for a contractual term of six years with one - third vesting annually over a three year period. The exercise price of the ISOs was $3.97 per share, which was equal to the fair market value of the Company’s Common Stock on the date of grant. On July 28, 2016, the Company granted an aggregate of 12,000 NQSOs from the Company’s 2003 Plan to five of the seven re-elected directors at our Annual Meeting of Stockholders held on July 28, 2016. Two of the directors are not eligible to receive options under the 2003 Plan as they are employees of the Company or its subsidiaries. The NQSOs granted were for a contractual term of ten years with a vesting period of six months. The exercise price of the NQSOs was $4.60 per share, which was equal to the Company’s closing stock price the day preceding the grant date, pursuant to the 2003 Plan. The Company estimates fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and the expected annual dividend yield. The fair value of the options granted during 2016 and 2015 and the related assumptions used in the Black-Scholes option model used to value the options granted were as follows (No options were granted to employees during 2015):
|  | Employee Stock Option Granted May 15, 2016 |
Weighted-average fair value per share |  | $ | 2.00 |
Risk -free interest rate (1) |  |  | 1.27% |
Expected volatility of stock (2) |  |  | 53.12% |
Dividend yield |  |  | None |
Expected option life (3) (in years) |  |  | 6.0 |
|  | Outside Director Stock Options Granted |
|  | July 28, 2016 |  |  | September 17, 2015 |
Weighted-average fair value per share |  | $ | 3.0 |  |  | $ | 2.84 |
Risk -free interest rate (1) |  |  | 1.52% |  |  |  | 2.21% |
Expected volatility of stock (2) |  |  | 55.99% |  |  |  | 57.98% |
Dividend yield |  |  | None |  |  |  | None |
Expected option life (3) (in years) |  |  | 10.0 |  |  |  | 10.0 |
(1) The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date over the expected term of the option. (2) The expected volatility is based on historical volatility from our traded Common Stock over the expected term of the option. (3 ) The expected option life is based on historical exercises and post-vesting data. The following table summarizes stock-based compensation recognized for fiscal years 2016 and 2015.
|  | Year Ended |
|  | 2016 |  |  | 2015 |
Employee Stock Options |  | $ | 53,000 |  |  | $ | 53,000 |
Director Stock Options |  |  | 45,000 |  |  |  | 39,000 |
Total |  | $ | 98,000 |  |  | $ | 92,000 |
As of December 31, 2016, the Company has approximately $74,000 of total unrecognized compensation cost related to unvested options, of which $43,000 is expected to be recognized in 2017, $30,000 in 2018, with the remaining $1,000 in 2019.

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